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Wilmington hurting from labor shortage in construction

Sean Shanahan cuts tile for a house in the Parkside at Mayfaire neighborhood in Wilmington Thursday, May 16, 2013. The house is being built by Tony Ivey Custom Homes and is expected to be finished in 6 weeks.

It has made it harder for smaller and custom residential builders to deal with increasing demand, and it is beginning to put pressure on wages and the prices of homes to rise, builders and economists said.

"We had the biggest decline of the residential housing market in history and record high levels of unemployment for construction and affiliated industries," said Michael Walden, an economist at N.C. State University's Poole School of Management.

A major factor in the labor shortage, even amid high joblessness, is that employers in general are having a hard time filling positions because there is a shortage of skilled, qualified candidates, said Brent Lane, director of the Center for Competitive Economies at the University of North Carolina's Kenan-Flagler Business School.

Out of business

Another key reason for the shortage is that the collapse of the housing industry caused many subcontractors to go out of business or into other businesses, said Donna Girardot, executive officer of the Wilmington Cape Fear Home Builders Association.

A loss of immigrant labor also figured in.

"A healthy percentage of construction workers were Hispanics and with the slow economy here many of those folks have left," Walden said.

Some of those in skilled trades, many of them nearing the end of their careers, retired, he said.

And thousands of skilled workers moved away to where there were jobs – like to Texas, whose economy continued to grow even as the country's spiraled, Lane said.

Now builders are having to wait for good subcontractors like plumbers, electricians and HVAC professionals.

"Smaller and custom builders are waiting in line for electricians and roofers, and that slows down their ability to turn a house around," Girardot said.

It's a good problem to have, with demand outstripping builders' ability to build fast enough, she said.

That's in contrast to the depressed environment of the last several years.

"We had the biggest decline of the residential housing market in history and record high levels of unemployment for construction and affiliated industries," Walden said. "Sales and construction have been trending up in North Carolina."

A busy time

Jules Sacchetti of Sacchetti Construction Corp. would agree.

"What's happening is this is the busiest I have been in the last 10 years," said Sacchetti, who's building in Brunswick County at Ocean Ridge, Seascape, River's Edge and Waterford.

"The good workers are extremely busy," he said. "There's a shortage of good help."

The growing shortage is "across the board. Everybody is getting stretched thin," said Tony Ivey, of Tony Ivey Custom Homes.

The subcontracting companies "don't have the manpower for the demand. A lot of people took on new careers. Part of the labor force went away," said Ivey, who's building in Mayfaire, Autumn Hall and Landfall in New Hanover County.

It's extending the time to complete homes. Sometimes the subs are a week late getting to the job, lengthening the time it takes to finish a house by about a month, Ivey said.

"We've gotten really busy in the last six months. It's a welcome change," he said.

Conflicting trends

But construction is one of the few sectors that hasn't seen a turnaround in employment, said Larry Parker, spokesman for the N.C. Employment Security Division.

"We still have been trending down," Walden said. "In June of 2007 we had 90,000 more people employed in construction" in North Carolina than today.

More recently, the state has gained 208,400 jobs from February 2010 through March 2013, Parker said.

"Construction in that time frame is down 7,500 seasonally adjusted," he said.

The disparity of falling numbers at the state level may reflect some lag time in the collection of data and whether all the construction labor is captured, Lane said.

"We may have some off-the-book labor supply that is not captured by the numbers," he said.

While the developing shortage of labor can be viewed as in some ways as good news for increasingly busy builders, it might well mean a raise for employees.

Rising wages?

A shortage of readily available labor is putting "a little bit" of pressure on labor, Ivey said.

He sees a 5 to 10 percent across-the-board increase in the next year for labor, materials and lot prices.

As of the end of the third quarter of 2012, the average weekly wage for a residential construction employee – skilled and unskilled – was $727, according to the N.C Department of Commerce Labor and Economics Analysis Division.

"If there is a shortage," Walden said, "it will be temporary. If there are opportunities we will see workers come back to that market."

Lane said the equation is simple.

"If there is a limited supply of labor, the wages should go up," he said. "It's good old basic economics at work."

<p>A shortage of skilled construction workers has developed in Wilmington and other areas of North Carolina even as overall employment in the field continues to fall.</p><p>It has made it harder for smaller and custom residential builders to deal with increasing demand, and it is beginning to put pressure on wages and the prices of homes to rise, builders and economists said.</p><p>"We had the biggest decline of the residential housing market in history and record high levels of unemployment for construction and affiliated industries," said Michael Walden, an economist at N.C. State University's Poole School of Management.</p><p>A major factor in the labor shortage, even amid high joblessness, is that employers in general are having a hard time filling positions because there is a shortage of skilled, qualified candidates, said Brent Lane, director of the Center for Competitive Economies at the University of North Carolina's Kenan-Flagler Business School.</p><p>Out of business</p><p>Another key reason for the shortage is that the collapse of the housing industry caused many subcontractors to go out of business or into other businesses, said Donna Girardot, executive officer of the Wilmington Cape Fear Home Builders Association.</p><p>A loss of immigrant labor also figured in. </p><p>"A healthy percentage of construction workers were Hispanics and with the slow economy here many of those folks have left," Walden said.</p><p>Some of those in skilled trades, many of them nearing the end of their careers, retired, he said.</p><p>And thousands of skilled workers moved away to where there were jobs – like to Texas, whose economy continued to grow even as the country's spiraled, Lane said.</p><p>Now builders are having to wait for good subcontractors like plumbers, electricians and HVAC professionals.</p><p>"Smaller and custom builders are waiting in line for electricians and roofers, and that slows down their ability to turn a house around," Girardot said. </p><p>It's a good problem to have, with demand outstripping builders' ability to build fast enough, she said.</p><p>That's in contrast to the depressed environment of the last several years.</p><p>"We had the biggest decline of the residential housing market in history and record high levels of unemployment for construction and affiliated industries," Walden said. "Sales and construction have been trending up in North Carolina."</p><h3>A busy time</h3>
<p>Jules Sacchetti of Sacchetti Construction Corp. would agree. </p><p>"What's happening is this is the busiest I have been in the last 10 years," said Sacchetti, who's building in Brunswick County at Ocean Ridge, Seascape, River's Edge and Waterford.</p><p>"The good workers are extremely busy," he said. "There's a shortage of good help."</p><p>The growing shortage is "across the board. Everybody is getting stretched thin," said Tony Ivey, of Tony Ivey Custom Homes.</p><p>The subcontracting companies "don't have the manpower for the demand. A lot of people took on new careers. Part of the labor force went away," said Ivey, who's building in Mayfaire, Autumn Hall and Landfall in New Hanover County.</p><p>It's extending the time to complete homes. Sometimes the subs are a week late getting to the job, lengthening the time it takes to finish a house by about a month, Ivey said.</p><p>"We've gotten really busy in the last six months. It's a welcome change," he said. </p><p>Conflicting trends</p><p>But construction is one of the few sectors that hasn't seen a turnaround in employment, said Larry Parker, spokesman for the N.C. Employment Security Division.</p><p>"We still have been trending down," Walden said. "In June of 2007 we had 90,000 more people employed in construction" in North Carolina than today.</p><p>More recently, the state has gained 208,400 jobs from February 2010 through March 2013, Parker said.</p><p>"Construction in that time frame is down 7,500 seasonally adjusted," he said.</p><p>The disparity of falling numbers at the state level may reflect some lag time in the collection of data and whether all the construction labor is captured, Lane said.</p><p>"We may have some off-the-book labor supply that is not captured by the numbers," he said.</p><p>While the developing shortage of labor can be viewed as in some ways as good news for increasingly busy builders, it might well mean a raise for employees.</p><h3>Rising wages?</h3>
<p>A shortage of readily available labor is putting "a little bit" of pressure on labor, Ivey said.</p><p>He sees a 5 to 10 percent across-the-board increase in the next year for labor, materials and lot prices.</p><p>As of the end of the third quarter of 2012, the average weekly wage for a residential construction employee – skilled and unskilled – was $727, according to the N.C Department of Commerce Labor and Economics Analysis Division.</p><p>"If there is a shortage," Walden said, "it will be temporary. If there are opportunities we will see workers come back to that market."</p><p>Lane said the equation is simple.</p><p>"If there is a limited supply of labor, the wages should go up," he said. "It's good old basic economics at work."</p><p><i></p><p><a href="http://www.starnewsonline.com/section/topic99"><b>Wayne Faulkner</b></a>: 343-2329 On <a href="http://www.starnewsonline.com/section/news41"><b>Twitter</b></a>: @bizniznews</p><p></i></p>